ILNews

COA rules on coal bed gas dispute

Back to TopE-mailPrintBookmark and Share

In settling a dispute between two Illinois companies regarding who has the legal right to recover coal bed methane gas, the Indiana Court of Appeals made its decision based on public safety and ruled in favor of the company assigned the coal bed gas lease.

The issue in Cimmaron Oil Corp. v. Howard Energy Corp., No. 26A01-0902-CV-67, is whether a 1976 lease that Cimmaron's predecessor obtained for the right to drill for and produce oil and gas includes the exclusive right to drill for and produce coal bed methane gas (CBM).

The Hardimans own the real property in Gibson County at question in the suit. In addition to the 1976 lease Cimmaron has, the Hardimans granted a coal bed gas lease to Howard Energy in 2001. In 2003, Howard Energy filed a complaint for declaratory judgment against Cimmaron and the Hardimans. Howard Energy argues the Cimmaron lease covers only the oil and gas estate and includes only the conventional natural gas emanating from the coal, while its lease holds the right to extract the coal bed methane.

The trial court issued declaratory judgment in favor of Howard Energy, adopting the "eastern rule" that CBM is part of the coal estate, and no interest in CBM passed by reason of the 1976 oil and gas lease. The trial judge also discussed public safety and how giving away control of the CBM from the coal mine operator wouldn't serve public interest.

Because the concept of producing CBM for commercial gain wasn't possible in 1976, it's up to the courts to determine whether that lease somehow permits it.

The Court of Appeals used rulings from other jurisdictions on the presumed or surmised intent in the grant of oil and gas leases pre-dating current technology. Some courts have considered CBM as part of the coal bed estate, as part of the oil and gas estate, or a distinct mineral estate.

The trial court in the instant case followed the "eastern rule" that CBM is a component of coal and CBM production and coal mining are best left in the control of a single entity, wrote Judge L. Mark Bailey. Cimmaron would rather the court adopt the "western rule," which says the holder of a broadly defined gas and oil estate may have rights to CBM, which is a form of gas.

The gas estate owner wasn't granted permission in the lease to invade the coal seam, which would be necessary to produce the CBM. In fact, the CBM would be from virgin coal seams and would require fracturing the seam with high pressure.

"The Hardimans did not explicitly agree to Cimarron's invasion of the coal bed in this manner; it is not reasonable to presume that the intent was to permit invasion of a valuable land asset, the coal bed, should a means of making profits arise in the future," wrote the judge.

The appellate court declined to adopt either rule, but agreed with the trial court that public policy would militate toward considering CBM to be part of the coal bed.

"Public safety would be disserved by pitting the miner who needs to dissipate CBM to prevent explosions against the gas estate owner whose financial resource is being depleted," wrote Judge Bailey. "Nevertheless, it is within the province of the Legislature, to which we defer, to make policy decisions."

ADVERTISEMENT

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. I was wondering about the 6 million put aside for common attorney fees?does that mean that if you are a plaintiff your attorney fees will be partially covered?

  2. My situation was hopeless me and my husband was on the verge of divorce. I was in a awful state and felt that I was not able to cope with life any longer. I found out about this great spell caster drlawrencespelltemple@hotmail.com and tried him. Well, he did return and now we are doing well again, more than ever before. Thank you so much Drlawrencespelltemple@hotmail.comi will forever be grateful to you Drlawrencespelltemple@hotmail.com

  3. I expressed my thought in the title, long as it was. I am shocked that there is ever immunity from accountability for ANY Government agency. That appears to violate every principle in the US Constitution, which exists to limit Government power and to ensure Government accountability. I don't know how many cases of legitimate child abuse exist, but in the few cases in which I knew the people involved, in every example an anonymous caller used DCS as their personal weapon to strike at innocent people over trivial disagreements that had no connection with any facts. Given that the system is vulnerable to abuse, and given the extreme harm any action by DCS causes to families, I would assume any degree of failure to comply with the smallest infraction of personal rights would result in mandatory review. Even one day of parent-child separation in the absence of reasonable cause for a felony arrest should result in severe penalties to those involved in the action. It appears to me, that like all bureaucracies, DCS is prone to interpret every case as legitimate. This is not an accusation against DCS. It is a statement about the nature of bureaucracies, and the need for ADDED scrutiny of all bureaucratic actions. Frankly, I question the constitutionality of bureaucracies in general, because their power is delegated, and therefore unaccountable. No Government action can be unaccountable if we want to avoid its eventual degeneration into irrelevance and lawlessness, and the law of the jungle. Our Constitution is the source of all Government power, and it is the contract that legitimizes all Government power. To the extent that its various protections against intrusion are set aside, so is the power afforded by that contract. Eventually overstepping the limits of power eliminates that power, as a law of nature. Even total tyranny eventually crumbles to nothing.

  4. Being dedicated to a genre keeps it alive until the masses catch up to the "trend." Kent and Bill are keepin' it LIVE!! Thank you gentlemen..you know your JAZZ.

  5. Hemp has very little THC which is needed to kill cancer cells! Growing cannabis plants for THC inside a hemp field will not work...where is the fear? From not really knowing about Cannabis and Hemp or just not listening to the people teaching you through testimonies and packets of info over the last few years! Wake up Hoosier law makers!

ADVERTISEMENT